• Leonard Brecken

Wage Growth & Offsets in Housing


One of the more interesting things revealed this AM is that acceleration in Wage growth (see Chart courtesy of Bloomberg) in 1Q18. Both measures of Employment Cost & Private Sector Wages have shown increases similar to pre-recession levels a big change for a long time. Wage growth is essential for the housing market because of rising interest rates which impact demand as a result of negatively impacting affordability. The fact that we are seeing wage growth tells me the rise in interest rates will get offset (at least in part) preventing a repeat of the extreme problems of 2008/09. However, with 10 year Treasury interest rates breaching 3% recently and still not near 2008/09 rates still have a ways to go. As a reminder 10 year Treasury interest rates were ove 4.5% so it begs to question why are they still so low: Central Banks buying bonds. As a word of caution the Central Banks are reducing their bond purchases so its logical rates could rise further everything else equal.


© 2018 by Charlotte Consultant Services

  • Black Facebook Icon
  • Black LinkedIn Icon